By Rachael Young, Program Officer, Mertz Gilmore Foundation and Steering Committee Member, EPIP-NY

Crowdfunding platforms raised an estimated $5.1 billion worldwide in 2013, nearly twice the total for 2012. Although most of this booming investment is in private ventures, mission-driven crowdfunding platforms are also emerging on the leading edge of technology, philanthropy, and social entrepreneurship. But beyond using digital tools to raise money for a cause, what unique promise does crowdfunding hold to drive social change?

The New York Chapter of Emerging Practitioners in Philanthropy organized a panel discussion in January to explore this question, featuring nonprofit leaders representing four crowdfunding platforms: Benevolent, DonorsChoose.org, ioby, and Kiva. Their conversation was skillfully moderated by Allison Fine, noted author and speaker on nonprofit digital engagement, and attended by more than 120 people. (The full podcast of the event can be found here, thanks to our terrific host, the Housing Works Bookstore Cafe.)

Finding, and Funding, New Approaches to Old Problems

First, crowdfunding can provide a source of much-need risk capital for creative projects that lack other sources of funding, as demonstrated by the crowdfunding pioneer DonorsChoose.org. Oliver Hiller-Hurst, chief technology officer, acknowledged that, despite the organization’s success raising money for classroom projects, these dollars are modest compared to the necessary scale of public investment in education. But he emphasized instead the important role that DonorChoose.org plays not just in meeting classroom needs but in giving educators the opportunity to test promising new ideas that are beyond the scope of government funding.

Crowdfunding platforms also create personal connections between donors and recipients, though this characteristic is not necessarily associated with social change. But ioby, a platform for “citizen-led, neighbor-funded” projects, takes this idea further. It has created an approach to meeting local needs that is both community-led and community-supported, building local leadership while fostering community civic engagement. Brandon Whitney, chief operating officer, described ioby’s model as “crowdresourcing”—referring not only to the dollars raised for a project but also to the other resources committed by community members, such as in-kind donations and volunteer time. (The foundation where I work was an early investor in ioby.)

More than Direct Relief

As Kiva demonstrates, crowdfunding platforms that serve individuals in need can at the same time play a direct role in facilitating broader systems change. Kiva is a global platform, now launching a U.S.-based pilot, that connects individual lenders to entrepreneurs who lack access to traditional financial services. In addition to providing loans to individuals, Kiva’s lending model also has potential to prove the creditworthiness of the entrepreneurs it serves to traditional banks. As Liezl van Riper, director of development–East Coast, described, Kiva ultimately aims to impact the broader lending marketplace, making it both more efficient and more equitable.

Finally, as Megan Kashner, executive director of Benevolent, argued, crowdfunding platforms can raise awareness about important social issues. Benevolent is a startup that connects donors to low-income individuals with a one-time need, such as a job uniform or a security deposit. She noted that an important pillar of Benevolent’s work is not only to help meet these needs but also to draw attention to common obstacles to financial self-sufficiency in a way that can ultimately influence employment and housing policy. The pivot from awareness to advocacy remains a long-term goal. In the meantime, Benevolent is providing vital support to families with unmet need.

What is Philanthropy’s Role?

There are concerns in the nonprofit sector that the upswing in individual donations to crowdfunding platforms may come at the expense of traditional nonprofits that may be more effective in providing services. This question warrants deeper study and discussion. But an equally interesting question is the extent to which the crowdfunding model can be used to provide new forms of social impact, beyond raising funds for direct services. As platforms like DonorsChoose.org and ioby show, crowdfunded resources are helping to build capacity within classrooms and within communities, exploring creative new solutions to problems. And as organizations like Kiva and Benevolent demonstrate, this model can also be used to address systemic problems while improving individual lives. The potential to both leverage individual donations and drive social impact in new ways presents a promising opportunity for philanthropic investment.

Rachael Young is  Program Officer for the NYC Communities Program, and Program Associate for the Climate Changes Solutions Program, at the Mertz Gilmore Foundation. She is also on the steering committee of EPIP-NY.